The Department of Labor’s fiduciary rule has been a battle for our industry for about six years now, and consumers rarely know about or understand the potential changes. But last week, the rule took on a new audience: the viewers of “Last Week Tonight with John Oliver.”
I spend almost every day reading something about this rule, whether it be about lawsuits, what advisors should do about it or how the industry should embrace it. The rule itself is extremely complicated and so are the things advisors managing retirement accounts must do. As Oliver explains, “for the average person saving for retirement … [it] doesn’t need to be this confusing.”
Oliver does a decent job of explaining why the rule came about, but he also sways in favor of the DOL, which doesn’t seem to be the opinion of our industry.
I see how many of our industry’s people are worried and furious about the harm it could cause, but I also see why the DOL and consumers think the rule is important to protect Americans and their money. Just take a look at this Reddit thread where consumers are concerned about the “hidden fees” their accounts may be facing. Here’s a look at hits and misses of the video:
What he got right:
In the beginning of the video, Oliver begins to discuss how the term “financial advisor” is not a credential but rather just a job title. Although he may have angered advisors for mocking their job titles, it’s true that consumers may not know these are not reflective of the advisor’s credentials.
Oliver goes on to explain how the fiduciary rule is good for consumers because they should have someone acting in their best interests. This makes sense because in order to create a successful retirement plan, many different products and investments will most likely be needed to make sure a client will have enough income for as long as they live. It only makes sense for advisors to be fiduciaries, right?
Where Oliver was wrong:
Although he was right to state that the titles “financial advisor, financial analyst, etc.” virtually mean nothing, he failed to mention that consumers bear part of that burden. When hiring someone to manage your money, one would think the consumer would do some research on the people chosen to manage that money. Really, it comes down to the lack of financial education our country faces.
Oliver also suggests people should be investing in low-cost index funds, which the show seems to imply is a good investment for any and every person. From my experience though, every portfolio and client situation is different, which is why financial advisors are important in the first place; suggesting one type of investment as a be-all, end-all for investors could create a sticky situation in the long run.
In case you missed it (or if you didn’t make it to the last two minutes of the video), here are the five retirement saving tips the show gives to its viewers:
1. Start saving now.
2. Invest in low-cost index funds.
3. Ask if your advisor if they’re a fiduciary.
4. As you get older gradually shift your assets from stocks to bonds.
5. Try to keep your fees under 1%.
One more thing to point out is that Oliver seems to think that annuities are almost always a bad investment decision. Annuities have been the subject of the “bad” in our industry according to Elizabeth Warren and Suze Orman (both of which he cites as fighting against the investment products).
To me, what this video tells consumers is that they should be aware of exactly how their money is being invested. Advisors should be clear to their clients about how they’re being compensated, and in turn, clients should communicate any concerns they have with their advisors.
My hope is that this video helps educate consumers at least on the importance of saving for retirement and that it sparks conversation. What did you think of the video and Oliver’s opinion/advice? Leave your thoughts in the comment section below.
(Related on ThinkAdvisor: Why HBO’s John Oliver Is Spot On About Brexit)
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